Weekly Average Momentum Index (AMI) rankings of HSA, SSPP, RSP, SELECT, ETF, iETF, sETF have been posted at http://sites.google.com/site/ycprankings
S&P 's downgrade of US debt triggered stormy reactions from investors. Stock markets went though a wildest ride this past week which can be illustrated by Dow Jones Industrial Average's triple-digit swing every day. The S&P 500 index closed this week at 1178 down 1.72%, the Dow Jones Industrial Average lost 1.53%, and the Nasdaq composite index decreased 0.96%.
After violently fell through the trend line, S&P 500 index is looking for a support level to build the base as shown in the weekly chart. Right now we are just in the initial phase when the index abruptly fell below the trend line and the momentum indicator headed downward rapidly. It will take a while for the index to find a comfort zone and stabilize there. So the questions are, where is the base and how long will it stay there. From the weekly chart, the index bounced off the intra-week low of 1100 indicating that there may be a short term support. From the past two similar situations in September 2008 and April 2010, it took markets about 6 -7 months to recover from the initial collapse and that may give us some idea about the duration. Fundamentally, the support level and duration are determined by whether we are already in a economic recession, heading toward a recession, or if we can avoid the recessionary path and return to the growth.
The intensity of this market collapse can also be observed in the ranking tables. The AMI indicator has turn negatives for number one rank funds in several ranking tables which do not contain bond or income funds. This only happened once during January-March time frame in 2009, but that time markets had stayed in the bottom for a while and poised for a rally. No doubt that the market volatility have increased greatly in the recent years due to trading technology advancement. Sell-offs are getting more abrupt and intense while rallies are gradual and slow. By using weekly closing prices, smoothing algorithm, and holding periods, I have tried to reduced the effect from market volatility. But no strategy is hundred percent as human psychology is erratic and unpredictable. We just have to accept that loss is part of the stock/fund tradings.
No comments:
Post a Comment